Becton Dickinson & Company (BDX) — Q2 2026 Earnings Call Transcript

Good morning, and welcome to BD's earnings call. I'm Shawn Bevec, Senior Vice President of Investor Relations. Thank you for joining us. This call is being made available via audio webcast at bd.com. Earlier this morning, BD released its results for the second quarter of fiscal 2026. The press release and presentation can be accessed on the IR website at investors.bd.com. Leading today's call are Tom Polen, BD's Chairman, Chief Executive Officer and President; and Vitor Roque, Executive Vice President and Chief Financial Officer. Before we get started, I want to remind you that we will be making forward-looking statements. You can read the disclaimer in our earnings release and the disclosures in our SEC filings on our Investor Relations website. Unless otherwise specified, all comparisons will be made on a year-on-year basis versus the relevant fiscal period. Revenue percentage changes are on an FX-neutral basis unless otherwise noted. Also, references to adjusted EPS refer to adjusted diluted EPS. The financials discussed here and included in the earnings release and 10-Q are presented on a continuing operations basis. Prior periods have been recast to reflect the spin-off of our Life Sciences business in combination with Waters, which is now accounted for as discontinued operations. Reconciliations between GAAP and non-GAAP measures are included in the appendices of the earnings release and presentation. With that, I will turn it over to Tom.

Thank you, Shawn, and good morning, everyone. Before turning to Q2 results, I wanted to take a moment to highlight this morning our announcement of Vitor Roque as CFO. As you know, Vitor has been Interim CFO since last fall and has done a fantastic job serving as a partner to me and the leadership team. Since he stepped into the role, we've delivered two solid quarters of performance and closed our transaction with Waters ahead of schedule, enabling us to fully initiate our New BD strategy while also enhancing our capital allocation strategy. In partnership with a leading executive search firm, management and the Board ran a comprehensive process that evaluated a broad range of external candidates in addition to Vitor. Our goal is to identify the best candidate to lead BD's finance function. We were focused on identifying a CFO with a demonstrated ability to lead sophisticated finance organizations in complex operating environments, deep understanding of our markets and value creation model and a strong track record of driving strategic, operational and financial performance. As we work through the process, it became clear that our best talent was already within the organization with Vitor. With 25 years at BD across our businesses, regions and segments, he brings the experience and perspective to translate strategy into results, drive consistent execution and create long-term shareholder value. I look forward to working closely with Vitor as we continue to execute on our strategy. Turning now to our Q2 results. We delivered a solid second quarter with revenue, adjusted margins and adjusted EPS all ahead of our expectations. More importantly, performance reflected broad-based execution with more than 90% of the portfolio delivering mid-single-digit growth and tangible progress in operational innovation and commercial performance through BD Excellence. Reflecting our first half performance and improved visibility into the remainder of the year, we are raising our full year adjusted EPS guidance. This gives us confidence that the New BD strategy is delivering through a dynamic environment. Revenue was $4.7 billion, up 2.6%. As I've discussed, we've been focused on building multiple scaled growth platforms that sit at the center of secular trends that are driving the future of health care. It is in these areas where we're focusing on enhancing our commercial execution and driving product innovation. During the second quarter, we delivered double-digit growth across these key growth platforms, including biologic drug delivery, Advanced Patient Monitoring, PureWick and Advanced Tissue Regeneration. We also delivered mid- to high single-digit growth in oncology, peripheral arterial disease and Rowa pharmacy automation. As you can see, these platforms are scaling. They're outpacing the broader portfolio and are becoming a more meaningful driver of our long-term growth profile. As expected, results were partially offset by focused pressure in Alaris, vaccines and China. We've been clear about these factors, which represent less than 10% of revenue, and we're managing them with discipline. We delivered adjusted operating margin of 24.2% and adjusted EPS of $2.90, reflecting strong operational execution through BD Excellence and the high quality of our revenue performance. Taken together, the quarter demonstrates the increasing quality, breadth and resilience of New BD. We're executing against three priorities that define how we're building New BD: compete, innovate and deliver. By expanding BD Excellence into commercial and R&D, we're building a stronger operating system, one that strengthens our competitive position, accelerates innovation in attractive markets and improves the earnings and cash generating power of the company over time. Starting with compete. We're raising the bar on commercial execution with greater rigor, faster decision-making and more disciplined use of data. In Q2, those actions translated into measurable share gains and customer conversions across several key platforms. A few to highlight. Within Connected Care, APM continued to grow above market, driven by strong HemoSphere Alta adoption and a nearly 20% increase in Smart Recovery consumables demand. With incremental sales force hiring largely complete, we're well positioned in the back half of the year. In Alaris, we drove share gains of approximately 50 basis points in the quarter and roughly 150 basis points year-to-date, with momentum continuing into Q3. In BioPharma Systems, we secured several significant long-term customer wins, including two next-generation GLP-1 programs with leading global pharmaceutical companies. Biologics are now expected to represent about 55% of segment revenue, reinforcing our confidence in the long-term growth outlook for this business. In Interventional, we continue to build competitive momentum across Surgery with strength globally from our synthetic hernia and Advanced Tissue Regeneration portfolio and early contributions from recent launches, including Surgiphor Pulse and Avitene Flowable. In UCC, we drove continued adoption across the PureWick portfolio, including expanding our PureWick at-home initiative and adoption in the VA. This is a good example of how we're combining innovation and commercial execution to expand both our penetration and our addressable market. What's important here is that these are not isolated wins, they reflect improving commercial discipline and our ability to convert strategy into tangible outcomes. Our second priority is innovate. We're strengthening our pipeline and increasing the pace of launches in high-growth areas that advance BD's leadership in Connected Care and enabling the shift to lower-cost settings and in advancing the treatment of specific chronic diseases. While we're still in the early innings of applying BD Excellence to R&D, we're already seeing momentum. Year-to-date, we've applied BD Excellence to five development programs, and on average, have reduced the time to launch by over 10 months. This is increasing the cadence of high-impact launches that expand our addressable markets and support sustainable long-term growth. In Peripheral Intervention, we launched the EnCor EnCompass Biopsy System in the U.S., strengthening our position in the $450 million global breast biopsy market. The system simplifies workflow and works across all imaging modalities, enhancing both efficiency and clinical flexibility. We also advanced our peripheral vascular portfolio with the early launch of the Revello Vascular Covered Stent in Europe. This expands us into new procedural segments within PVD and addresses more complex lesions. The U.S. launch is planned for next fiscal year. In APM, we expanded the launch of the HemoSphere Stream Module in the U.S. and Europe. Stream enables continuous noninvasive blood pressure monitoring with real-time data and extends beyond traditional care settings, significantly expanding our addressable market. Collectively, these launches in the quarter show that innovation at BD is becoming more focused, more disciplined and more impactful in the categories that matter most to our long-term growth. Our third priority, deliver, reflects our focus on quality, operational excellence, margin expansion and cash flow generation. Our BD Excellence system and operational performance is a significant differentiator for BD and a key source of confidence in our ability to continue investing in growth while expanding earnings power. We're building a simpler, more efficient manufacturing network, reducing our footprint by roughly half to around 50 sites globally today, with actions underway to reduce it further. BD Excellence drove approximately 8% productivity in the quarter and service levels of over 90%. These actions are supporting growth, expanding margins, increasing cash flow and strengthening the resilience of our operating model. We also made strong progress on our $200 million cost-out program with a run rate of $150 million already completed and clear visibility to fully deliver by the end of next year. Product quality is core to BD, and I want to provide an update on the FDA warning letter we received last Thursday related to our El Paso, Texas facility that manufactures ChloraPrep and PurPrep infection prevention products. In response, we voluntarily placed these products on ship hold in the U.S. while we complete additional final release testing. This additional testing is already performed for products sold in Europe. We expect this testing to take approximately three weeks and pending satisfactory results, we would resume shipments at that time. We are continuing to manufacture product during this period. And importantly, there's been no patient safety signals, and we stand behind the safety of these products. Moving to capital allocation. We remain committed to a disciplined framework, which prioritizes returning capital to shareholders, investing in high-growth opportunities through disciplined tuck-in M&A and driving consistent improvement in return on invested capital. Our capital allocation actions continue to align tightly with our framework. In the quarter, we returned $2.3 billion to shareholders, including $2 billion through share repurchases. We completed the separation of our Life Sciences business at approximately a 19x EBITDA multiple, and our Advanced Patient Monitoring acquisition continues to perform well ahead of our deal model. In closing, we are pleased with our first half performance and improved visibility into the remainder of the year as we continue to execute across our New BD growth strategy. With that, I'll turn it over to Vitor to provide more detail on our financial performance and updated guidance.

Thanks, Tom, and good morning, everyone. I'm honored to step into the CFO role at a pivotal moment for BD as we accelerate our New BD strategy. I appreciate Tom and the Board's confidence. I firmly believe BD's finance function must support the company's strategy to drive shareholder value creation. I see tremendous opportunity ahead as we have clear, well-defined strategy to unlock growth while continuing to be diligent on our cost structure to improve P&L leverage and drive sustainable EPS growth. This must all be paired with a clear capital allocation strategy that will continue to focus on shareholder returns while maintaining a strong balance sheet. I look forward to continue to engage with the investment community in the weeks and months to come. With that, let me turn to the quarter. We delivered a solid second quarter with $4.7 billion in revenue, up 2.6%, reflecting broad-based growth across most of the portfolio, with a stronger contribution from higher-margin businesses and disciplined execution through a dynamic environment. This was partially offset by expected pressure in Alaris, vaccines and China. Medical Essentials grew 1.7%. MDS and Specimen Management delivered solid growth in the U.S., driven by share gains in Vascular Access Management and BD Vacutainer portfolio. This was partially offset by market dynamics in China. Connected Care grew 3.3%, led by Advanced Patient Monitoring which grew 12% on strength in the U.S. consumables. MMS grew modestly with the difficult prior year comparison in Alaris capital, offset by strong infusion sets performance on increased utilization versus last year fluid supply disruption and pull-through from Alaris share gains. BioPharma Systems declined 1.8%, in line with our expectations. Continued double-digit growth in Biologics led by GLP-1s was more than offset by lower demand for vaccine products. Interventional grew 5.3% with solid mid-single-digit growth across the segment. UCC was led by continued double-digit in PureWick. Surgery performance was driven by double-digit growth in Infection Prevention and Advanced Tissue Regeneration. PI growth was led by peripheral vascular disease and oncology, partially offset by China market dynamics. In summary, revenue performance was not driven by one business or one geography; we saw strength across multiple platforms where we have been investing, and that strength more than offset known and focused headwinds. Turning to the P&L. Adjusted gross margin was 54.7%, down 90 basis points versus the prior year. This includes 70 basis points of positive benefit from productivity and mix, offset by 160 basis points of tariffs. Adjusted operating margin was 24.2%, down 110 basis points versus the prior year. This includes 160 basis points of tariffs and increased commercial investments in key growth areas. Importantly, both adjusted gross and operating margins were ahead of our expectations. Adjusted EPS was $2.90, up 3.9% and ahead of our expectations, reflecting solid revenue performance, better-than-expected margins and strong operational execution. Adjusted EPS excludes approximately $450 million of noncash asset impairment charges recorded in the quarter. Following the separation of our Life Science business and combination with Waters, we exited certain activities that no longer align with the New BD strategy. These actions are part of the work to simplify BD, sharpen our focus and align resources behind the platforms that matter most to the long-term value creation. Turning to cash flow and capital allocation. Year-to-date free cash flow was $1.1 billion, up significantly versus the prior year. The increase was driven by disciplined working capital management, including improved collections and inventory management as well as continued progress reducing nonoperational cash items. This increases our flexibility to invest in growth and return more capital to shareholders. During the quarter, we returned approximately $2.3 billion to shareholders, including $2 billion in share repurchases and $0.3 billion in dividends. We also retired $2.1 billion of debt in the quarter. We ended the quarter with net leverage of approximately 2.9x and remain committed to our 2.5x long-term net leverage target. Our capital deployment remains aligned with the framework we laid out: return capital to shareholders, invest in focused growth and maintain balance sheet discipline. Moving to our updated fiscal '26 guidance. While we are reaffirming our full year revenue guidance of low single digits, we expect revenue growth in the second half to be roughly similar to the first half. Based on current spot rates, currency is estimated to be a tailwind to revenue of about 120 basis points. Moving down to the P&L. We continue to expect adjusted operating margins of approximately 25%, inclusive of the impact of tariffs. Our adjusted effective tax rate is expected to remain between 16% and 17%. Given our first half performance, the breadth of growth across the portfolio and continued productivity through BD Excellence, we are increasing our adjusted EPS guidance to $12.52 to $12.72. With that, I'll turn it back to Tom.

Thanks, Vitor. Before we open the call for questions, I want to recognize Rick Byrd, President of the Interventional segment, who recently announced his intention to retire after nearly 25 years with BD. Rick has been a strong leader and partner over his career at BD, strengthening our portfolio and helping build a strong foundation across the Interventional business. We're grateful for his many contributions and wish him all the best in his retirement. With that, let's start the Q&A session. Operator, can you please assemble the queue?

Maybe one on the performance in the quarter, both on the top and bottom line. Headline organic was 2.6%. What was underlying growth excluding the one-time headwinds, and which segments did those headwinds impact on the bottom line? Vitor, it looks like TSA income was a driver. Is TSA income sustainable in the back half? What was the other income that aided results in the second quarter?

Thank you, Vijay, and good morning and welcome back. Good to have you back covering BD. We are, as you said, really pleased with the performance in the quarter, and we saw it play out with our key growth platforms. We had multiple platforms growing double digits in the quarter. We talked about a number of those: our Biologics business, our Advanced Patient Monitoring business, and a number of others. We're continuing to see another major portion of our portfolio growing high single digits. And overall, 90% of the company is continuing to grow solid mid-single digits, right around 5%. The three areas that we called out in the beginning of the year — China, the vaccine market dynamics and Alaris — are playing out as expected and that's offsetting that mid-single-digit growth in the remaining portion of the portfolio, but we're really pleased with the execution that we're seeing across the team, the up-tempo commercial rigor as well as the pace on innovation and launches. I'll turn it over to Vitor to address the other questions.

Vijay, thanks for the question. As Tom highlighted, we are very happy with our performance, both on the top line and the gross margin. We had strong performance in both of those areas. On the item that you are mentioning, it's not necessarily related to the TSA. What we had was a planned item from the very beginning of the year in a different line of the P&L on the G&A line that on the accounting when we booked, we ended up booking in the other income line. But it's just a reclassification between lines. It's not driven by the TSA. Everything played out as expected on the quarter for us.

So there was no benefit on the P&L.

No benefit on the P&L from that.

Maybe start with thinking about the cadence of the year, both on revenue and margins. I know you said revenue growth kind of roughly similar first half, second half, but the comps do get tougher. So when I think about how some of the Alaris, China, vaccines headwinds play out to kind of get the similar growth rate in the back half of the top line. And when you think about margins, how should we think about margins over the course of the year and what you're assuming on inflation as well?

Sure. I'll turn that to Vitor.

Travis, thanks for the question. Starting with revenue, I think we feel very good about the revenue we have on the back half of the year. We delivered solid performance in the first half, over-delivering on our internal estimates and expectations, and we see good line of sight to deliver in the back half of the year, as we mentioned in the prepared remarks. The comps are pretty much similar in the back half of the year. There are no specific topics there. So we feel confident about the delivery in the back half of the year from a revenue perspective. From a margin perspective, we also see good performance, over-delivering on the quarter on the gross margin, which makes us more confident for the back half of the year. A lot of our ramp in margins in the back half of the year is driven by the execution of our BD Excellence, which has been part of our plan all year long. We are seeing results of that, achieving 8% productivity in Q2, and that's going to generate benefits for us in the later part of the year. Given our cap and roll, we have good visibility of our margin profile for the back half of the year, which also increases our confidence in delivering the margins in the back half.

And I would add we do end up lapping a bit of vaccines. If you recall, that started in the very back end of last year. So we do see that headwind is not as significant in the back end of the year versus what we saw in the front part of this year. One more thing people are asking about is oil and resin and the Middle East. From a business perspective, resins and molded plastic components represent about 5% of our COGS. We've been very effective in mitigating impact this year through the hedging actions we took several years ago, which are benefiting us now, as well as normal cap and roll mechanisms and strong productivity. As we think about next year, we have a focused team monitoring where oil prices and resin prices go. We have multiple resin sources. Pricing actions are also an area BD focuses on. We will take actions as needed to protect margins pending where those prices stabilize over time.

Congrats on a good quarter here. Tom, I wanted to ask on sort of the New BD strategy here and really the priorities for free cash flow. I believe in the past, it used to be predominantly tuck-in M&A to drive growth accretive additions to the business. And now it seems like that's slotted number two behind share repurchase. So maybe just give a quick overview on how you're thinking about capital allocation here and the priorities, if you don't mind.

Thanks for the question, Robbie. As we've communicated, as we look at the New BD and given the valuation of the company today, we believe the company is substantially undervalued. We have a very strong focus on cash flow generation, which you saw come through in the quarter. As we think about how we deploy that cash flow, at current stock price we have a top priority on buying back shares as we view that as a top form of value creation for our shareholders. We also pay a strong dividend, which is a solid yield at today's stock prices. We do have an active M&A pipeline, but we've been extremely disciplined in our M&A track record over the last several years, focusing exclusively on deals that accelerate revenue growth, drive margins and improve return on invested capital. That framework doesn't change. From an allocation perspective, we are prioritizing share buybacks at current valuation levels, but I would expect we would do tuck-ins in the future in a focused way and in that order of capital prioritization. Thank you for the question, Robbie.

Tom, I thought I'd just ask on the ChloraPrep ship hold. What's assumed in the guidance, how much of U.S. Specimen Management is ChloraPrep? I assume the vast majority. And what gives you the confidence the ship hold will only last three weeks and that the testing will be positive?

Thanks for the question, Larry. A little background: the ChloraPrep and PurPrep products are primarily within our Surgical business with a little bit in our MDS business, and those products are made in the El Paso facility. We have put those products on hold from shipping in the U.S., but we're continuing to manufacture at full capacity. There's been no patient safety signals, and we stand behind the safety of the products. The testing we are performing is the testing we've been doing for many years on the product that we ship to Europe. We have a strong track record with that testing on this exact same product. We've extended that testing and added an additional testing loop onto the finished goods that are going to be shipped in the U.S. That testing takes approximately three weeks. We're beginning that testing this week. Pending satisfactory results, like we've seen for the product shipped to Europe, we would resume shipment at that time. In the meanwhile, we're not slowing down manufacturing.

I'm curious to know what you're charging Vitor with, what you're tasking Vitor with as he steps into the role. Obviously he's been there a long time. He knows the job. Compete, innovate, deliver — he's integral in making that happen, Tom. But stepping into the role in a different time in BD's history, what's he prioritizing? What are his financial priorities? Anything changing or different that you're emphasizing? I'd be curious to understand how you're both thinking about it and what we should think about.

Vitor and I are highly aligned on the New BD strategy and our focus on execution quarter after quarter on the commitments we've shared. We're very pleased with this quarter. We're highly focused on continued cash flow generation and revenue growth of the company. Those are reflected in our top priorities: commercial excellence and innovation excellence, which fuel our revenue growth. I'll turn it over to Vitor to share his priorities and financial philosophy.

Sure. Thanks, Tom, and thanks for the question. I'm honored to be taking this position at a pivotal moment at BD. New BD excites us about what we can unlock going forward. I have spent more than two decades at BD across different businesses, regions and segments, and I do have a clear view of what drives performance and what is structural versus cyclical. My focus is driving growth in partnership with Tom and the leadership team, but also setting expectations that are confident and sustainable. Communicating transparently, delivering consistently against what we commit to. Over time, consistency builds trust and preserves flexibility. In terms of priority, driving growth is at the top of our agenda. We will continue to drive that and execute without disruption, keeping the team focused on delivering commitments, maintaining clear and consistent communications so investors understand our performance drivers and outlooks without ambiguity. We'll stay disciplined with capital allocation, protect the balance sheet, maximize returns to shareholders and invest in selective growth drivers. It's about continuity, not drastic change — sharpening execution rather than changing direction.

Vitor, congratulations on the permanent role here as CFO, I look forward to working with you. Maybe dive in a little bit deeper on MMS. Clearly a ton of focus on Alaris. Could you help frame some of the different pieces in that line item? For example, opportunities on pump disposables, especially given disruption at a competitor. I believe your pump set share, especially sets outside the pump, is lower than your pump capital share. You talked a bit about Rowa and Parata. Help break down a little further. Any detail on sizing the businesses in there and how you're thinking about growth trajectory, especially in light of the previously disclosed Alaris headwinds?

Thanks, David. You know the business well. Starting with Alaris, we actually saw Alaris perform modestly better than expected in the quarter. It was another quarter of share gains — about 50 basis points in the quarter and roughly 150 basis points year-to-date. That's really good and we see momentum in Q3. We have the largest Alaris competitive funnel in the history of the company today. We lost no infusion accounts in the quarter. Regarding consumables growth, we saw low double-digit growth in infusion sets driven in part by an easier comp relative to last year's fluid shortage, but also driven by share-gain pull-through. We're focused on both dedicated sets and non-dedicated sets to support customers with BD solutions. On Pyxis, we're in the early stages of our next-generation Pyxis launch, Pyxis Pro, the first new Pyxis platform in about 20 years. It's the first AI-enabled and cloud-enabled Pyxis. Early customer response has been strong, translating into competitive traction in the first half of the year. Seventy-five percent of our wins are competitive conversions, reinforcing meaningful share-gain potential. Pyxis Pro enhances capacity, security and durability and includes our new AI platform, BD Incada, which Bilal is leading. Incada will aggregate data from devices like Alaris, Pyxis, APM and other software platforms to improve end-to-end medication management workflows and inventory visibility. On pharmacy automation, we've hired a president for that business to give it further focus under Bilal's leadership. It's still a subset within MMS, but the opportunity is significant in Parata and Rowa. Automation addresses labor shortages, especially in Europe, and it supports trends toward shipping drugs directly to patients' homes and direct-to-consumer pharmacy services. Many online retailers and large distributors are using automation in their warehouses and shipping medications directly to consumers. Overall, MMS has multiple levers we are focused on executing against, and we'll continue to drive those.

Congrats on a really strong quarter here. Tom, could you talk a little bit about initiatives around BD Excellence and excellence in manufacturing? It seems the organization continues to drive more efficiency, more cost-outs, more back-end fixed asset rationalization and it's in the middle of another big wave currently. Color on strategy, pace, any comments there? And a follow-up on your comments on oil: your positioning around hedges — how much protection do you have into the future? What options do you have as hedging benefits wear off in 9 to 12 months?

Thanks, Matt. On BD Excellence, it didn't exist three to three and a half years ago, and our teams have done great work. This year we'll do over 2,000 Kaizens across the organization, up substantially from last year. It's at significant scale and continues to build momentum. Every plant and business unit has dedicated BD Excellence leadership. Our leadership team is involved in Kaizens directly. We're improving safety, quality, delivery and customer service levels over 90%. Sales teams are seeing the best service levels we've had for customers, allowing them to focus on selling product rather than managing back orders. From a cost perspective, we delivered about 8% productivity in the quarter and last year delivered similar performance. We're also taking an aggressive posture on network architecture, having reduced sites to around 50 globally and planning further reductions. This enables us to scale facilities and invest in informatics, AI and BD Excellence capabilities that create a flywheel. We appointed Mike Feld as Chief Revenue Officer, who has a strong lean background and is applying BD Excellence to commercial processes, improving sales execution, funnel management and deal closing. We're also applying BD Excellence to R&D. The first five projects we applied it to this year reduced time to launch by an average of 10 months. We have many more planned in the back half of the year. We see BD Excellence as a long-term strategic advantage across operations, commercial and innovation. On oil and resin: hedging works well for this year and is working for us. As we think about next year, there's a five- to six-month P&L flow-through we can see and mitigate. We have visibility to take actions including pricing and efficiencies. We're not assuming oil will reset to lower prices; we are assuming it remains high into next year and will take actions accordingly under that assumption. If it gets better, that's a positive upside.

Everything Tom said is spot on. From a hedging perspective, especially for North American resins, approximately 50% of our resin purchases in North America are hedged. That gives us flexibility. We also have multisource suppliers for resin to navigate the cost environment for 2026. Given our cap and roll timing, the teams are working to offset these costs through efficiencies, and price is an important topic heading into fiscal 2027.

Thinking about the potential for the portfolio to drive an acceleration in organic revenue growth back into the mid-single-digit range over the next 12 to 24 months. How should investors think about the weighted average market growth rate of the portfolio and the evolution over the next 24 to 36 months? Is the reacceleration going to be driven by an increase in WAMGR and share gains or primarily stable WAMGR and share gains in your various business units?

Thanks, Josh. Our view of the long-term New BD growth profile remains confidence in delivering durable mid-single-digit growth over time. You can see that in our broader portfolio performing at about 5%. This quarter, 90% of the portfolio grew around 5%. Over the last several years we've built scaled growth platforms that we're doubling down on. At the beginning of this fiscal year, we announced investing about $35 million of incremental selling resources behind those platforms. You're seeing that pay off: APM U.S. selling organization increased by 15%, the U.S. PI sales force increased by 15%, and we've invested in PureWick at-home initiatives and biologic drug delivery. We're putting more feet on the street and more sales focus to scale these opportunities rapidly, making them a higher-weighted mix of BD's portfolio. In the quarter, biologic drug delivery, Advanced Patient Monitoring, PureWick and Advanced Tissue Regeneration all grew double digits, supplemented by other categories growing high single digits. Our R&D investments are fueling these categories as well. We're investing in next-generation PureWick, new indications in tissue regeneration, and new biologic drug delivery solutions. We remain active and disciplined on tuck-in M&A but prioritize share buybacks at current valuations. We have strong cash generation and can pursue focused deals that fit our model. Overall, reacceleration will be driven by increasing the weight of higher growth markets and share gains supported by commercial investment and innovation.

A couple of things looking forward. At the beginning of this call, you highlighted pressures from Alaris, vaccines and China. I'm curious how that rolls off or eases over the next couple of quarters. And I know it's early to be thinking about fiscal 2027, but how do you think about the New BD's template for revenue and EPS growth?

Thanks, Joanne. Our view on those headwinds hasn't changed; we're executing through them and they are playing out as expected. China will continue to become a smaller portion of revenue, around 4% of New BD today and potentially dropping into the low 3s as the rest of the portfolio grows into 2027. Market dynamics in China remain challenging. On Alaris, we understand the path clearly: it's a unique situation related to a large upgrade cycle tied to remediation. We said there would be about a 100 basis point Alaris headwind this year and we expect about a 200 basis point headwind in 2027 driven by the comparator. We have completed remediation actions this year and expect that headwind to subside, and by 2028 Alaris will no longer be a headwind. We're confident in that path. On vaccines, there has been a significant drop in vaccine demand across the market this year. Whether there's another similar drop next year is not expected at this point, but we'll have more clarity as we get orders from our partners. Overall, our view of New BD's revenue and EPS template is unchanged: we're focused on execution, driving durable mid-single-digit growth and expanding margins through BD Excellence and disciplined capital allocation.

Just a quick follow-up on Alaris. When in 2027 would you expect that transition to complete? I'm trying to figure out when you return to mid-single-digit growth. Is it sometime during 2027 or should we think about fiscal 2028? And a quick follow-up on GLP-1: you continue to be positive on it, but should we expect any negative impact from oral GLP-1s on your pharmaceutical business?

It's effectively a 200 basis point headwind in 2027 driven by the comparison to 2026. You're looking at an 18-month window where, by the end of 2027, that dynamic will have subsided and underlying performance will pick back up. That is what we've shared and have confidence in. On GLP-1s, our view is unchanged. Oral GLP-1s are expected to be incremental and complementary. Injectables are expected to remain a backbone of the category for the foreseeable future. Some next-generation injectable treatments that protect against muscle wasting are coming and will remain important. GLP-1s remain a strong growth driver for us and a major focus. We announced two significant deals with large pharmaceutical companies for new GLP-1 molecules, and that continues to be a focus to ensure those come into our devices. We also have over 80 GLP-1 biosimilar deals signed to be in our devices — not just syringes but also auto-injectors and pens, which carry higher ASPs than syringes. The value opportunity in biosimilars is actually higher per dose than for some novel GLP-1s. Our commercial team is focused on partnering with customers to cover both novel molecules and biosimilars to have broad exposure to the category. Biologics, as an example, have increased to about 55% of BioPharma Systems revenue, up from about 50% previously, demonstrating the growing weight of these high-growth categories in our portfolio. We're pleased with the momentum and are focused on ensuring BD has leading exposure as new molecules and biosimilars come to market.

To add, the Alaris remediation will finish this fiscal year and we'll hit a run rate starting next year. The 200 basis points in 2027 is driven by the higher base comparison in 2026. Starting in 2027 and into 2028, Alaris will be at a normal run-rate revenue level; the 2026 comparison is what creates the headwind.

And to elaborate, we will continue to grow off that 2027 base for Alaris. When you start hitting replacement cycles in the future, Alaris will naturally be part of replacement dynamics again, but after 2027 it will no longer be a headwind. Today, 90% of the BD portfolio is growing about 5%. As that headwind comes off, we expect that to be reflected in our overall growth rate. We remain confident in driving the underlying business through innovation and commercial execution.

Thank you, operator, and thanks, everyone, for your questions and your continued interest in BD. We look forward to connecting with everyone again next quarter.